Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Reallocation of the 216-220 MHz
1390-1395 MHz, 1427-1429 MHz
1429-1432 MHz, 1432-1435 MHz
1670-1675 MHz, and 2385-2390 MHz
Government Transfer Bands
WT Docket No. 02-08
RM-9267
RM-9692
RM-9797
RM-9854
RM-9882
Reply Comments of the
Office of Advocacy, U.S. Small Business Administration
on the Initial Regulatory Flexibility Analysis and the
Notice of Proposed Rulemaking
The Office of Advocacy of the United States Small Business
Administration ("Advocacy") submits these Reply Comments to the
Federal Communications Commission ("FCC" or "Commission")
regarding its Notice of Proposed Rulemaking ("NPRM")(1) in the
above-captioned proceeding. In the NPRM, the Commission proposes
new service rules for licensing a total of 27 megahertz of
spectrum in seven different bands that were transferred from
government to non-government use. (2)The Commission proposes to
license several of the spectrum bands in single blocks on a
nationwide basis.(3)
Advocacy recommends that the Commission not license on a
nationwide basis as it will create a nearly impenetrable bar for
small businesses to become licensees. Advocacy recommends that
the Commission use smaller geographic areas, such as Metropolitan
Statistical Areas ("MSAs") and Rural Service Areas ("RSAs"), in
order to encourage small business participation in the spectrum
auction and to speed service to rural areas.
1. Advocacy Background
Congress established the Office of Advocacy in 1976 by Pub.
L. No. 94-305(4) to represent the views and interests of small
business within the Federal government. Advocacy's statutory
duties include serving as a focal point for concerns regarding
the government's policies as they affect small business,
developing proposals for changes in Federal agencies' policies,
and communicating these proposals to the agencies.(5) Advocacy
also has a statutory duty to monitor and report to Congress on
the Commission's compliance with the Regulatory Flexibility Act
of 1980 ("RFA"),(6) as amended by the Small Business Regulatory
Enforcement Fairness Act, Subtitle II of the Contract with
America Advancement Act ("SBREFA").(7)
The RFA is designed to ensure that, while accomplishing
their intended purposes, regulations do not unduly inhibit the
ability of small entities to compete, innovate, or to comply with
the regulation.(8) The major objectives of the RFA are: (1) to
increase agency awareness and understanding of the potential
disproportionate impact of regulations on small business; (2) to
require that agencies communicate and explain their findings to
the public and make these explanations transparent; and (3) to
encourage agencies to use flexibility and provide regulatory
relief to small entities where feasible and appropriate to its
public policy objectives.(9) The RFA does not seek preferential
treatment for small businesses. Rather, it establishes an
analytical requirement for determining how a regulatory scheme
can best be implemented without erecting barriers to competition.
To this end, the RFA requires the FCC to analyze the economic
impact of proposed regulations on different-sized entities,
estimate each rule's effectiveness in addressing the agency's
purpose for the rule, and consider alternatives that will achieve
the rule's objectives while minimizing any disproportionate
burden on small entities.(10)
2. Commission Should Offer Spectrum Licenses Based on Smaller
Licensing Areas
In the NPRM, the Commission tentatively concluded to license
the 1670-1675 MHz band on a nationwide basis and sought comment
on this conclusion.(11) The Commission also inquired if
nationwide licensing is appropriate for the paired 1392-1395 MHz
and 1432-1434 MHz bands as well as the unpaired 1390-1392 MHz and
2385-2390 MHz bands.(12)
Advocacy agrees with commenters that recommend that the
Commission auction the spectrum bands based on smaller license
areas to encourage small business participation in the auctions
and ensure service to rural areas. The American Mobile
Telecommunications Association ("AMTA") and the United Telecom
Council ("UTC") recommended the Regional Economic Area Groupings
as the appropriate service area.(13) AMTA said that small,
localized users may be overlooked by band managers with
nationwide responsibility, while UTC said that a single
nationwide license will make it unlikely that the spectrum will
be available to a wide variety of applicants.(14) The National
Telecommunications Cooperative Association ("NTCA") went a step
further and urged the FCC to use MSAs and RSAs, as these will
allow small and rural carriers to obtain licenses for territory
they actually seek to serve.(15)
Advocacy notes there are several benefits to offering
licenses on smaller areas. First, by offering licenses on a
smaller license area basis, the Commission will encourage small
businesses to provide services in these spectrum bands.
Nationwide licensing will have the opposite effect. Bidding
levels will simply become too high for small businesses, despite
the use of bidding credits. Small businesses will face the
prospect of bidding on an area that is likely larger than they
are capable of serving, at prices that will be elevated by the
presence of urban areas, and in competition with larger
businesses for the only license in the band being auctioned.
Second, by offering smaller-area licenses, the Commission
will promote provision of wireless services to rural communities.
Local companies that want to provide wireless services to the
rural areas are unlikely to bid on a license that covers the
entire country and are unable to bid against large companies.
In addition, larger companies with a nationwide footprint will
likely target the larger markets first, as those areas have the
highest concentration of potential customers. If a nationwide
licensee deploys in rural areas, it will be years after the urban
areas.
Third, smaller area licensing will not unduly deter
development of nationwide networks. Licensees interested in
providing wireless services with a large footprint can connect
separate service areas through relationships with neighboring
licensees, particularly to provide coverage to heavily traveled
roads. This approach might be more expensive for the licensee
than if its license area covered the whole Nation, but will not
deter the formation of such networks. On the other hand, having
a single nationwide license area will be prohibitively expensive
for small business, which will exclude them completely, and could
impede service to outlying rural communities.
Smaller area licensing will impose costs on larger companies
trying to form national networks, and nationwide licensing will
completely restrict small businesses seeking to enter the market
and serve rural areas. Licensing by MSA and RSA is the most
appropriate, because more communities will enjoy service and
because large companies could more easily bear the costs of
assembling nationwide networks. By contrast, nationwide
licensing could exclude small and rural companies from the market
altogether.
3. The Commission Cannot Rely upon Partitioning to Lessen
Impact of Nationwide Licensing
In the Initial Regulatory Flexibility Analysis, the
Commission suggests that post-auction partitioning of the
spectrum will minimize the economic impact of having a single
nationwide license per band.(16) Unfortunately, small businesses
may have to pay considerably more for a partition of a license in
rural areas than if it is auctioned as a discreet license area,
as the cost of a partitioned rural area will likely reflect the
value of the urban areas. The nationwide licensee, as a
potential competitor to the business seeking partition, might try
to exact a higher price, or the nationwide licensee might not be
willing to partition the license, even if it contains areas the
licensee has no current plans to serve. As a result of any of
these factors, large rural areas could remain unserved
indefinitely, and small businesses could be shut out of providing
service. The Commission cannot rely upon partitioning of the
licenses as a cure for granting a single nationwide license that
restricts small business participation in the industry.
Conclusion
If the Commission adopts a nationwide licensing system,
small businesses will not become service providers in these
bands, and rural areas will go unserved. Licenses will be more
expensive and less tailored to a business plan and service need
than if the Commission used a MSA/RSA licensing basis. Small
businesses will have to bid against large companies for a single
license. Post-auction partitioning of a rural area will be more
expensive than licensing the rural community on a separate basis.
By contrast, adopting an MSA/RSA licensing scheme maximizes
service to rural areas, disseminates licenses among many
businesses, and still permits service on a nationwide area basis.
Advocacy therefore urges the Commission to use smaller license
areas such as MSAs and RSAs and avoid using single nationwide
licenses.
Respectfully submitted,
Thomas M. Sullivan
Chief Counsel for Advocacy
Eric E. Menge
Assistant Chief Counsel for Telecommunications
Office of Advocacy
U.S. Small Business Administration
409 3rd Street, S.W.
Suite 7800
Washington, DC 20416
March 19, 2002
ENDNOTES
1. In re Reallocation of the 216-220 MHz, 1390-1395 MHz, 1427-
1429 MHz, 1429-1432 MHz, 1432-1435 MHz, 1670-1675 MHz, and 2385-
2390 MHz Government Transfer Bands, Notice of Proposed
Rulemaking, WT Dkt. No. 02-08, FCC 02-15 (rel. Feb. 6, 2002).
2. NPRM at para. 1.
3. NPRM at para. 33.
4. Pub. L. No. 94-305 (codified as amended at 15 U.S.C. 634 a-
g, 637).
5. 15 U.S.C. 634(c)(1)-(4).
6. Pub. L. No. 96-354, 94 Stat. 1164 (1980)(codified at 5 U.S.C.
601 et seq.).
7. Pub. L. No. 104-121, 110 Stat. 857 (1996)(codified at 5
U.S.C. 612(a)).
8. 5 U.S.C. 601(4)-(5).
9. See generally, Office of Advocacy, U.S. Small Business
Administration, The Regulatory Flexibility Act: An Implementation
Guide for Federal Agencies, 1998 ("Advocacy 1998 RFA
Implementation Guide").
10. 5 U.S.C. 604.
11. NPRM at para. 33.
12. Id.
13. Comments of AMTA to the NPRM in WT Dkt. 02-081, at 6 (March
4, 2002); Comments of AMTA to the NPRM in WT Dkt. 02-081, at 6
(March 4, 2002); Comments of UTC to the NPRM in WT Dkt. 02-081,
at 15 (March 4, 2002).
14. Comments of AMTA to the NPRM in WT Dkt. 02-081, at 6 (March
4, 2002); Comments of AMTA to the NPRM in WT Dkt. 02-081, at 6
(March 4, 2002); Comments of UTC to the NPRM in WT Dkt. 02-081,
at 15 (March 4, 2002).
15. Comments of NTCA to the NPRM in WT Dkt. 02-081, at 2-3 (March
4, 2002).
16. NPRM, Appendix A, p. 62.